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Fedex May Get A Christmas Rift

November 19, 1995

Workplace: UNIONS

FEDEX MAY GET A CHRISTMAS RIFT

Federal Express Corp. Chairman Frederick W. Smith has tried to keep unions out of Federal Express ever since he founded the company in 1973. So employees are well-paid and even get to evaluate their bosses anonymously each year. What's more, FedEx' 17% annual growth record has provided rich career opportunities that make for a largely happy workforce.

But the pretty picture at FedEx is now marred. For 17 months, the company has been negotiating its first-ever union contract, with the Air Line Pilots Assn. (ALPA), which won the right to represent the company's 2,800 pilots only after its third try in 1993. On Nov. 25, the two sides will emerge from a federally mandated cooling-off period--possibly hotter than ever. The union, claiming that management has no intention of signing a union contract, is threatening a work slowdown smack in the middle of FedEx' busiest season.

DOUBLE JEOPARDY. So far, management isn't budging. Executives fear that doing so would encourage the United Auto Workers and Teamsters to renew organizing efforts among the company's 110,000 other employees. FedEx also may be banking on an employee group that's seeking to oust ALPA. The risk, however, is that FedEx could wind up angering employees and customers alike. "This is not about money," charges Joseph DePete, head of ALPA's FedEx unit. "It's about sending signals. They want to stop the unions."

The central issue is one of control. Like any union, ALPA wants its contract to cover as much ground as possible. Management wants the opposite. For instance, FedEx insists that pilots based overseas be excluded from the union pact. That's no big deal now, since the company employs only about 50 pilots overseas. But foreign operations account for 12% of FedEx' business and are growing by 25% a year. Management also wants the right to hire nonunion pilots to fly leased planes in peak season. "If we give in to [ALPA's] extravagant demands, we'd have major problems," says Charles W. Thomson, FedEx' vice-president for personnel.

FedEx has given a little more slack on pay and benefits. The company has offered a 4% pay hike in the first year of a three-year contract and has mentioned the possibility of a small increase tied to profitability in year three. But the pilots--who haven't had a raise since 1990--want more. Management has agreed to boost the match on its 401(k) plan from $500 a year to $4,500. It also would lift the limit on pension payouts. Still, pensions would remain significantly below those of pilots at major airlines, says ALPA.

One reason for management's hardnosed position may be ALPA's weak standing among pilots. A rival group, the FedEx Pilots Association (FPA), claims to have 1,160 signed requests for a new union election--just 240 short of a majority. While requests don't necessarily translate into anti-ALPA votes, FedEx could end up with no union at all if both groups together can't get 51% of the vote in a new election. "There is widespread dissatisfaction with the way ALPA has represented pilots," charges David Sanders, chairman of the competing union's steering committee. He argues that many pilots prefer a more conciliatory approach and disagree with ALPA's hardball tactics, such as the Oct. 30 ad in USA Today threatening a holiday slowdown.

VULNERABLE. Still, FedEx' hard-nosed strategy could backfire. The company says it is well-prepared for a job action, with a system of spare planes and crews, a control center that can plan route changes down to the truck level, and phone banks in 16 call centers to handle most emergencies. And much of the holiday volume is second-day delivery, which gives the company more time to respond. But ALPA counters that over 15% of FedEx' peak-season flights are flown by pilots working overtime, which is voluntary--and therefore vulnerable to a job action. And while ALPA's overall membership numbers aren't overwhelming, ALPA pilots are concentrated in key hubs such as Los Angeles and Newark. "This labor skirmish couldn't come at a more unfortunate time for Federal Express," says Brian P. Clancy, a shipping consultant in Atlanta.

Smith's stance could succeed if enough ALPA members decide that defying management makes them too uncomfortable in FedEx' usually congenial culture. But if pilots pull off a successful holiday slowdown, unions may loom larger than ever in the company's future.

Fedex Vs. Its Pilots

The pilots' union has been negotiating its first Federal Express contract for 17 months, to no avail. Major issues in dispute:

OVERSEAS PILOTS

FedEx wants to exclude all foreign-based pilots from the union's contract.

LEASING

Management insists on the right to lease planes staffed by nonunion pilots.